Incentive Funds

in the USSR, funds set up from the profits of socialist enterprises (associations) in order to increase worker initiative and give workers a greater collective and personal interest in raising output, labor productivity, and production efficiency. Incentive funds are an important part of the unified system of material and moral stimulation. They promote the compatibility of personal and collective economic interests with nation-wide public interests and play an important part in the management of production.

In accordance with the new system governing planning and economic incentives, incentive funds comprise three separate funds, namely a material incentive fund, a social-cultural and housing fund, and a fund for the expansion of production. The sizes of the funds depend on sales, profits, profitability, and labor productivity and on indicators relating to product mix, product quality, and the meeting of contractual obligations. In addition to the funds enumerated above, enterprises also set up specialized funds to stimulate the development of certain types of production; examples include the consumer goods fund, the fund set up from profits on the sale of household chemical products, and the fund for developing local industry. Other specialized funds reward the attainment of certain goals; funds of this type include the bonus fund for all-Union socialist competition and the bonus fund for those creating and introducing new technology.

The Twenty-fifth Congress of the CPSU (1976) pointed out the need for a more effective use of incentives in improving the economic mechanism. The congress recognized that this goal requires improvements in the system governing the formation and use of incentive funds to make the funds more effective in increasing production efficiency, implementing a policy of economies, and accelerating scientific and technological progress. Improvements in the funds were also deemed necessary in order to give enterprises (associations) a greater incentive to adopt and fulfill high plan targets.

Economic incentive systems also exist in other socialist countries. Examples of the funds set up for production purposes are the repair and improvement fund in the People’s Republic of Bulgaria, the development fund in the Hungarian People’s Republic, and the investment and repair funds in the German Democratic Republic and the Polish People’s Republic. Examples of material incentive funds in other socialist countries are provided by the bonus funds in the Mongolian People’s Republic, the Socialist Republic of Rumania, the Czechoslovak Socialist Republic, and the German Democratic Republic. Among the funds for sociocultural measures are the social fund in the Polish People’s Republic and the sociocultural funds in the German Democratic Republic and the Czechoslovak Socialist Republic.